Friday, April 25, 2014

Enforcement Actions: Week in Review

According to the complaint (PDF), Robert J. Vitale and Realty Acquisitions & Trust, Inc. "fraudulently raised at least $8.7 million from investors through four real estate securities offerings" by making "materially false and misleading statements and omissions concerning, among other things, the credentials and experience of Vitale and other purported RATI officers, Vitale's supposed reputation for honesty..., the safety of investing in RATI, and the ownership of the properties purchased with RATI investor proceeds." Additionally, Vitale allegedly acted as an unregistered broker and violated a "2006 Commission Order that barred him from association with any broker or dealer." The SEC has charged the defendants with violating various provisions of the Securities Act and Exchange Act and seeks disgorgement, prejudgment interest, and civil penalties. The SEC also seeks disgorgement and prejudgment interest from relief defendant Coral Springs Investment Group, Inc.

Vitale was "sentenced in September 2013 to two years in prison after being convicted of obstruction of justice and providing false testimony in the investigation that led to the SEC case filed today."

A final judgment as been entered against Gurudeo Persaud for allegedly violating antifraud provisions of the securities laws. The final judgment enjoins him from future violations and orders him to pay over $126,000 in disgorgement and prejudgment interest. " The Commission dismissed its civil penalty claim against Persaud, who pled guilty to charges in a parallel criminal case, was ordered to pay restitution of $948,340 to his victims, and is currently serving a three-year prison sentence."

According to the complaint (PDF), Keith A. Seilhan traded on insider information concerning the magnitude of BP's oil spill and the fact that "BP's potential liability and financial exposure, was likely to be greater than had been publicly disclosed." Seilhan learned of this information when he was tasked by BP "with coordinating BP's oil collection and clean-up operations in the Gulf of Mexico and along the coast." The insider trading "allowed Seilhan to avoid losses and reap unjust profits as the price of BP securities dropped by approximately 48 percent." Seilhan has consented to a final judgment that permanently enjoins him from future violations of the securities laws, and orders him to pay over $224,000 in disgorgement, prejudgment interest, and a civil penalty.

According to the complaint (PDF), "TelexFree, Inc. and TelexFree, LLC claim to run a multilevel marketing company that sells telephone service based on "voice over Internet" (VoIP) technology but actually are operating an elaborate pyramid scheme." The complaint also charges TelexFree co-owner James Merrill,...TelexFree co-owner and treasurer Carlos Wanzeler,...TelexFree CFO Joseph H. Craft,...and TelexFree's international sales director, Steve Labriola" as well as "four individuals who were promoters of TelexFree's program: Sanderley Rodrigues de Vasconcelos,...Santiago De La Rosa,...Randy N. Crosby,...and Faith R. Sloan." The SEC has secured an asset freeze against these companies and seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties. The SEC has also named TelexFree Financial, Inc., TelexElectric, LLLP, and Telex Mobile Holdings, Inc. as relief defendants and seeks disgorgement and prejudgment interest from them.

According to the complaint (PDF), Wayne Pennoyer Weddington III and his companies, Brunswick Capital LLC and Brunswick Capital Partners LP, have been charged "with solicitation fraud, making false statements, and registration violations in connection with a commodity pool that he formed called Pennoyer International Funds Global Opportunity LLC." The CFTC "seeks civil monetary penalties, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws, as charged."

An Order (PDF) was issued last week filing and settling charges against Derek J. Bridges and his companies, Empire Sterling Metals Corp. and I.P.M. Investments, Inc., "for engaging in illegal, off-exchange precious metals transactions." These financed metal transactions were executed through Hunter Wise Commodities, LLC. The Order "requires Bridges and Empire jointly to pay restitution totaling $243,456.61 and Bridges and I.P.M. jointly to pay restitution totaling $14,854.41 to their customers." The Order also "imposes permanent registration and trading bans on Bridges, Empire, and I.P.M."

Previously, the CFTC sued Hunter Wise in December 2012 "charging it with engaging in the same type of illegal, off-exchange precious metals transactions engaged in by Empire and I.P.M. through Hunter Wise." This year, "the court entered judgment against Hunter Wise for engaging in illegal precious metals transactions."

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